Remember GroceryWatch? This was supposed to “put downward pressure" on supermarket prices as a key part of Labor’s 2007 election campaign on cost-of-living pressures for the much-loved “working families".

After that election, the difficulties of transforming easy promises into hard policies meant GroceryWatch turned into a website to allow shoppers to compare supermarket prices. Finally, the government ditched even that as a waste of time and money just as it was about to be launched in mid-2009.

That was also after the Australian Competition and Consumer Commission found, in a 642-page report, that there was no evidence
Coles
and
Woolworths
were engaging in anti-competitive behaviour or unjustified price rises.

The repetitive wonders of the Australian system mean that the cycle of political rhetoric is now reversed. Political reverence for helping “working families" with groceries has long since changed into determination to protect suppliers and producers from alleged supermarket bullies.

That’s largely because food price deflation in recent years means fighting against rising prices for consumers is no longer the hot issue. Instead, it’s all about protecting the rights and interests of smaller suppliers and small businesses.

Their livelihoods are supposedly threatened by low prices and aggressive behaviour from the two dominant supermarket chains. A commitment to “sustainability" rather than “affordability" is now the major political fashion in food.

Supermarket duopoly demonised

Walk into most gatherings of farmers or green groups or even inner-city consumers and the mere mention of Coles or Woolies in other than outraged tones threatens an instant breach of social protocol. At least while interest rates remain low, the supermarkets have increasingly replaced the big banks as public bogeymen, driven by greed and excess profits. (Aldi and Costco should feel slighted but relieved they are escaping much attention. Perhaps the threat of terrible multinationals will surface in the next political cycle.)

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That’s the background to Monday’s announcement of a voluntary code of conduct between Coles and Woolworths and the Australian Food and Grocery Council after more than a year of negotiations. This beats the alternative – more government inquiries and imposed conditions. But for the suppliers, it means the onus of addressing greater regulations and compliance issues is primarily on the supermarkets. The big guys will have to constantly prove they’re playing fair.

That’s even more sensitive given the policy focus of the new Small Business Minister
Bruce Bilson
. To the concern of big business, he is vowing to better protect small business by extending consumer protections to small business contracts. This is part of a “root and branch" review – yet another – of competition law.

The minister waved a copy of the new code of conduct in Parliament on Monday, calling it an exciting day in providing a balance to supplier concerns about use of market power. For the supermarkets, it is also a useful political balance in addressing the level of complaints. There’s nothing like references to new “dispute resolution mechanisms" to slow the momentum of attacks.

Yet for all the talk about a “voluntary" agreement, the code will have the force of law – at least once it has gone through more government consideration and a “regulatory impact statement". That means the ACCC will be able to punish breaches of the regulations. Given the commission seems to be a more interfering regulator on such issues under the chairmanship of
Rod Sims
, this won’t stop the commercial and political pressure on supermarkets.

Sims on the front foot

Sims, for example, has no intention of pulling back from his current two inquiries into suppliers’ allegations of bullying and alleged unconscionable conduct by supermarkets and into petrol discount shopper dockets.

But the new rules mean there will be much greater agreed restrictions, for example, on the supermarkets’ ability to suddenly “de-list" products or to demand additional payments for marketing purposes or for ensuring prominent space on the shelves.

The code will also address complaints from small suppliers that retailers can make improper use of innovation and intellectual property of small suppliers to boost development of their own home brands and private labels. That will no longer be permitted – though proving this is actually happening will, inevitably, be much harder.

More dispute resolution and mediation, no doubt.

But the supermarkets have been able to resist pressure to separate their purchases of branded products from purchases that are to be used as part of private-label stock. Private-label products are usually cheaper but allow higher margins for retailers. They now account for around 25 per cent of groceries and even higher percentages in some food categories. Suppliers complain private-label production forces down prices for both branded and non-branded products.

This, too, will continue to be a matter of dispute no matter how many company compliance officers or independent mediators are appointed.

But as Wesfarmers CEO
Richard Goyder
pointed out at the general meeting this month, it was simplistic to simply blame companies such as Wesfarmers-owned Coles for the range of problems facing farming and food industries.

He cited cumbersome regulation, a lack of productivity and the high currency as some of the other culprits. A code of conduct would be most useful if it helped suppliers also reflect on those issues rather than just blaming the supermarkets.